Financial Accounting Multiple Choice Questions
Question 1
Which of the following is shown on both a multiple-step and
a single-step income statement?
a. Gross profit.
b. Net sales.
c. Income from operations.
d. Other expenses and losses.
e. None of the above
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Question 2
The records for Uptown Pet Shop showed the following:Sales
$225,000 Beginning merchandise inventory $ 30,000
Purchases 135,000 Cost of goods sold 150,000
What was the ending merchandise inventory?
a. $120,000
b. $ 75,000
c. $ 45,000
d. $ 15,000
e. None of the above
Question 3
Under a perpetual inventory system merchandise is purchased
for cash. Which is the correct journal entry to record this purchase?
a. Debit to Purchases and a credit to Cash
b. Debit to Merchandise Inventory and a credit to Accounts
Payable
c. Debit to Merchandise Inventory and a credit to Cash
d. Debit to Purchases Returns and Allowances and a credit to
Cost of Goods Sold
e. None of the above
Question 4
An item of merchandise with a list price of $200 was
purchased with a trade discount of 40% and credit terms of 3/10, n/30. The
vendor was paid within the discount period. Which is the correct journal entry
to record the payment?
a. Accounts Payable, debit, $200.00; Purchases Discount,
credit, $86.00; Cash, credit, $114.00
b. Accounts Payable, debit, $80.00; Merchandise Inventory,
credit, $2.40; Cash, credit, $77.60
c. Accounts Payable, debit, $120.00; Merchandise Inventory,
credit, $3.60; Cash, credit, $116.40
d. Purchases, debit, $200.00; Purchase Discount, credit,
$86.00; Cash, credit, $114.00
e. None of the above
Question 5
The buyer received an invoice from the seller for
merchandise with a list price of $400 and credit terms of 2/10, n/60. The term
‘n/60’ in the credit terms is which of the following?
a. Credit period
b. Trade discount
c. Cash discount allowed for early payment of the invoice
d. Discount period
e. None of the above
Question 6
Part of the merchandise purchased for cash at an earlier
time is now being returned. Which of the following is the correct journal entry
for this return, assuming the seller grants cash refunds and a perpetual
inventory system is used?
a. A debit to Cash and a credit to Purchases
b. A debit to Cash and a credit to Merchandise Inventory
c. A debit to Purchases Returns and Allowances and a credit
to Cost of Goods Sold
d. A debit to Merchandise Inventory and a credit to Cash
e. None of the above
Question 7
Net sales is Sales less
a. Sales returns.
b. Sales discounts.
c. Sales returns and allowances.
d. Sales returns and allowances and sales discounts.
e. None of the above
Question 8
Office supplies are purchased on account. The company uses a
perpetual inventory system. What is the correct journal entry for this purchase
of office supplies?
a. A debit to Purchases and a credit to Cash
b. A debit to Merchandise Inventory and a credit to Cost of
Goods Sold
c. A debit to Office Supplies and credit Accounts Payable
d. A debit to Merchandise Inventory and a credit to Accounts
Payable
e. A debit to Office Supplies and a credit to Cash
Question 9
Gross margin (gross profit) from sales is the difference
between which of the following?
a. Net sales and the cost of goods sold plus all the
expenses
b. Net sales and operating expenses
c. Gross sales less the sales discounts and sales returns
and allowances
d. Net sales and the cost of goods sold
e. None of the above
Question 10
A retailer who uses a perpetual inventory system purchased
$8,000 of merchandise on credit. The credit terms were 2/10, n/30, FOB
destination. The freight costs were $130. What was the journal entry to record
the purchase?
a. Merchandise Inventory, debit, $8,000; Freight-In, debit,
$130; Accounts Payable, credit, $8,130
b. Merchandise Inventory, debit, $8,130; Accounts Payable,
credit, $8,130
c. Merchandise Inventory, debit, $8,000; Accounts Payable,
credit, $8,000
d. Merchandise Inventory, debit, $7,870; Freight-In, debit,
$130; Accounts Payable, credit, $8,000
e. None of the above
Question 11
Overland purchased $3,000 of merchandise from Overseas. The
credit terms were 2/10, n/30. The freight terms were FOB shipping point.
Freight costs of $60 were included in the invoice. What journal entry should
Overland record, assuming Overland uses a perpetual inventory system?
a. Merchandise Inventory, debit, $3,000; Freight-In, debit,
$60; Accounts Payable, credit, $3,060
b. Merchandise Inventory, debit, $3,000; Accounts Payable,
credit, $3,000
c. Merchandise Inventory, debit, $2,940; Accounts Payable,
credit, $2,940
d. Merchandise Inventory, debit, $2998.80; Accounts Payable,
credit, $2,998.80
e. Merchandise Inventory, debit, $3,060; and Accounts
Payable, credit, $3,060.
Question 12
In a perpetual inventory system, which of the following
would be debited when inventory is sold on account?
a. Cost of goods sold.
b. Merchandise inventory
c. Sales
d. Accounts receivable
e. A & D
Question 13
FOB Shipping Point means that the
a. Good are placed free on board to the buyer’s place of
business
b. Buyer pays the freight
c. Seller pays the freight
d. The trucking company pays the freight
e. None of the above
Question 14
In a perpetual inventory system. A return of defective
merchandise is recorded by crediting
a. Purchases
b. Purchase Returns
c. Purchase Allowance
d. Merchandise Inventory
e. None of the above
Question 15
In a perpetual inventory system, which of the following is
not part of the series of journal entries made when merchandise is sold on
credit?
a. Credit the Cost of Goods Sold account
b. Credit the Sales account
c. Credit the Merchandise Inventory account
d. Debit the Accounts Receivable account
e. None of the above
Question 16
The records for Roberta’s Bridal Shoppe showed the
following:Cash $115,000 Current Liabilities $ 45,000
Net Receivables 27,000 Revenues 170,000
Merchandise Inventory 95,000 Operating Expenses 119,000
Short-term Investments 20,000
What is the acid-test ratio?
a. 3.16:1
b. 3.60:1
c. 5.71:1
d. 2.56:1
e. None of the above
Question 17
The net sales of the business totals $200,000 and the Cost
of Goods Sold for the same period totals $146,000. What is the gross margin
ratio?
a. 0.22
b. 0.25
c. 0.27
d. 0.33
e. None of the above
Question 18
Under the periodic inventory system, which of the following
is the Purchases account not used to record?
a. Cash purchases of merchandise inventory
b. Purchases of any asset on account or note payable
c. Purchases of merchandise inventory on account
d. A and C
e. None of the above
Question 19
Under the periodic inventory system, which of the following
is a correct closing entry?
a. Income Summary, debit; Sales, credit
b. Income Summary, credit; Purchase Returns and Allowances,
debit
c. Income Summary, debit; Merchandise Inventory (ending
balance), credit
d. Purchases, debit; Income Summary, credit
e. All of the entries shown are correct closing entries
